N.S.Venkataraman for BeyondHeadlines
The industry houses, some economists and section of media in India have been criticizing Indian Prime Minister Manmohan Singh and his government until recently for not implementing what they call as economic reforms. They have gone to the extent of accusing the government of suffering from policy paralysis, whatever it may mean.
Perhaps, irked by such criticisms, Manmohan Singh has finally jumped into the fray and his cabinet has cleared the foreign direct investment measures and the steps to open up the retail market to international business houses.
Manmohan Singh appears to have a tunnel vision as far as the above two measures are concerned and seems to think that FDI and opening of retail outlets are the be all and end all of economic reforms. He has not been able to project any other better measures to improve the economy, in tune with the country’s basic strength.
One fact that has to be remembered is that Indian economy has steadily grown at the GDP level of 7 to 8% in the past few years without these so called economic reform measures. This obviously implies that the basics of the Indian economy are strong and they only need to be sustained and strengthened. For doing so, the FDI and opening the flood gates of Indian retail market to international business houses are not going to help at all. On the other hand, they may only weaken the basics of the economy and make the Indian economy more dependent on international business houses, whose primary job is to earn money and profit and not sustain the Indian economy.
What Manmohan Singh has missed to see in his enthusiasm for FDI is the basic strength of Indian agricultural sector, where the potentials to promote the growth of real economy and substantially increase the employment opportunities and improve the distribution of income are immense.
The features of the Indian agricultural sector are that it is largely self dependent with highly competent and dedicated farming community with enormous traditional knowledge as well as initiative to perform better, if given opportunities. The country’s green revolution and white revolution were so successful only because of the competence of the Indian farmers and agriculturists, who responded admirably when appropriate technology and policy support were extended to them.
Unfortunately, Manmohan Singh’s policy of opening of the retail market will have negative impact in the Indian agricultural sector by placing the farmers at the mercy of international merchants, on whom the government will have no worthwhile control. The price of agricultural inputs and agricultural products will certainly go up as the cost of retail operations, (which is highly decentralized and low now) and the profit margin for the retailers have to be met by the consumers. At the same time, the Indian farmers will not get better returns, as the highly organised retail merchants will use their “clever management tactics” to squeeze the farmers who will be left helpless and hopeless.
With two thirds of India’s population remaining below poverty line (more than 600 million people), the purchasing capacity of vast number of Indians are extremely low and they can afford to buy only minimum food items that are essential to physically survive. Already we find a situation now where vast segment of the country’s population depend on the rations, freebies, Mahatma Gandhi rural employment scheme and unemployment allowance extended by the government for their survival, due to spiraling prices of essential commodities. Any further increase in the cost of food items will entirely uproot them and lead to severe social unrest. One wonders whether Manmohan Singh has thought about such eventualities. What benefits will the country get by this newly created situation by Manmohan Singh?
There are several other strengths that India has such as vast technical manpower and scientific pool, enormous mineral deposits, huge workforce etc. which can be competently capitalized by a thinking government by initiating appropriate indigenously suited economic reform measures. The government does not seem to be thinking on these lines at all, while framing its recent economic reform programmes.
Perhaps, Manmohan Singh is calculating on the overseas investment that the country will get effortlessly by FDI and opening the retail market but this would be a policy that can be termed as penny wise and pound foolish.
Further, Manmohan Singh should be aware that his government is suffering from huge credibility crisis today, with the country men largely convinced that corruption and nepotism in today’s India has become the order of the day under his leadership. People think that millions of rupees of money which are earmarked by the government for investment in infrastructure and welfare projects are being siphoned away by corrupt politicians , bureaucrats and business houses. Manmohan Singh has given an impression that he has no control over such corrupt forces who are draining the country.
While his recent economic reform measures are flawed, in the present circumstances, even with whatever support that Manmohan Singh will get from Indian industry houses and section of media , certainly he will not be able to convince the common man that his recent economic reform measures are sound and in the national interest.
(N.S.Venkataraman is a Chemical Engineer from Annamalai University in Tamil Nadu and Director of Nandini Consultancy Centre. He can be reached firstname.lastname@example.org)